Three former executives at a New Jersey-based company that is now in bankruptcy are facing charges related to illegally obtaining a credit line for $400 million. The men worked for Transmar Commodity Group Ltd., which was a cocoa trading company headquartered in Morristown. It sold to leading chocolate companies including Hershey and Nestle.

According to federal prosecutors, the three defendants gave false “borrowing base” reports to banks between 2014 and the end of 2016 to inflate the actual amount of collateral the company had so that it could qualify for credit.

The company filed for Chapter 11 bankruptcy at the end of last year. According to prosecutors, the company owed some $360 million to various banks when it made its bankruptcy filing. The bankruptcy was converted to Chapter 7 in July of this year.

The three defendants are the company’s former chief executive, his son, who oversaw one of the company’s affiliates, and the man who served as the company’s finance vice president. The father and son were arrested in their New Jersey homes. The third man, who also lives in New Jersey later surrendered to the Federal Bureau of Investigation (FBI).

They are facing charges of wire fraud, bank fraud and conspiracy to commit fraud. If found guilty, they could each be sentenced to 30 years behind bars for each count.

Most Chapter 7 bankruptcies don’t end up with the debtors facing federal criminal charges, of course, as no wrongdoing is alleged or has taken place. However, it’s essential that as you explore the possibility of bankruptcy and which type of filing is appropriate for you that you have the guidance of an experienced New Jersey bankruptcy attorney.

Source: Reuters, “U.S. charges former Transmar cocoa executives with fraud,” Jonathan Stempel and Brendan Pierson, Aug. 08, 2017